TRANSFER OF
WEALTH

More Examples of How Our Economic
System Is Designed to Transfer Wealth to the Rich From Everyone Else

January 16, 2002

Yesterday I gave two examples of how the economic structures of
this country, and the "rules of the game," are designed to
transfer wealth to the rich from everyone else.

Here are two more examples, one on the
state level, the other on the federal level, based on the columns of
Paul Krugman in the New York Times:

Shifting the Tax Burden Away From
the Wealthy: State Level

In the early 1990's, budget shortfalls
led 44
states to raise taxes. Then during the boom in the late 90's,
states lowered taxes. What's the problem, you ask? How could
raising, and then lowering taxes shift the tax burden? Like this:

The taxes that were raised in the
early 1990's were regressive taxes, such as the sales tax, which fall most
heavily on middle- and lower-income families.

But when the time came to cut taxes,
it wasn't the sales taxes that were pared back towards their original
levels. Instead, taxes were cut that fall most heavily on upper-income
families.

To put some numbers on this:

A family earning, say, $30,000 per
year pays considerably more in state taxes than a family with the same
constant-dollar income did in 1990, while a family earning $600,000 per
year pays considerably less.

The net effect is "a
redistribution of the tax burden away from the haves towards the
have-nots."

Shifting the Tax Burden Away From
the Wealthy: Federal Level

During the reign of that great
champion of the common man, Ronald Reagan, payroll
taxes were increased. The purpose was to ensure the integrity of
the Social Security system by generating a surplus that could be tapped to
pay benefits to an increasingly elderly population.

The payroll tax is a regressive tax --
just like the state sales tax discussed above.

At the same time the regressive
payroll tax was being increased, the progressive income tax -- which falls
more heavily on the wealthy -- was being decreased.

Compounding the situation, the excess
revenue generated from the payroll tax increase isn't being used to create a
Social Security system surplus. With the disappearance of the budget
surplus, the excess revenue is simply being used to fill revenue holes in
the overall federal budget - holes which wouldn't exist absent the
cuts in the income tax rates.

Columnist Krugman addresses the
following question to Alan Greenspan:

Was this what Mr. Greenspan intended
— to raise taxes on the poor and the middle class, so that they could be
cut for the rich? If not, why doesn't he say something?

Uh, maybe because that was (and
of course still is) the purpose?

Such is certainly the effect: wealth
distribution is terribly askew
in the United States.

When we begin seeing the effect of
George Bush's $1.35 trillion tax cut plan -- whose benefits, surprise!
surprise! -- go mostly to the wealthy, would anyone care to hazard a guess
how future shortfalls in revenues will be made up?

Might it be cuts in programs that
benefit the poor and middle-class, and increases in the tax burdens of those
two groups?